BP is launching a salary sacrifice scheme next year, which could treble its current fleet size of 4,000 vehicles.

The move marks a fundamental change for the company as it currently outright purchases its vehicles and provides them through an Employee Car Ownership (ECO) scheme.

The HR department sets BP’s company car policy and has been the driving force behind the move, which is part of a wide-ranging plan to improve staff benefits.

A company spokesperson said that the scheme is “more financially efficient for BP” and extends the benefit to more staff.

The move to salary sacrifice will see the car scheme managed and funded through an external supplier. Under the scheme, an additional 8,000 employees who are not currently eligible for a company car will be able to use part of their salary to lease a car.

The 3,600 car users currently in the ECO scheme – comprising an allowance and payment package - will migrate to new arrangements over the next three years as their cars come up for replacement. Approximately 1,000 drivers will be up for renewal each year.

However, the scheme is not compulsory. Users who receive a cash allowance will continue to do so next year and will be free to use the money for any purpose rather than sign up to the new scheme.

BP’s 300 essential car users will remain in a separate business car scheme, although it will be reviewed in 2010.

BP expects interest in the new benefits package through salary sacrifice as it is more tax and NI efficient for employees, as well as for the employer. Employees will be offered a wide choice of cars, including all those currently on the car list.

The changes were only agreed following consultation with staff.

If all eligible employees sign up to the salary sacrifice scheme, which will be introduced in January 2010, BP’s fleet would grow to around 12,000 vehicles – effectively a grey fleet.

The company has a comprehensive grey fleet policy through its global road safety standard, which was introduced in 2005 and applies to all BP vehicles and drivers around the globe.

Every year employees sign the standard confirming they have been trained and their vehicle is maintained in accordance with policy. If they fail an audit they must find alternative ways of travelling on business such as public transport of car hire.

BP is not alone in revising its company car policy – last month Biffa overhauled its scheme to cut costs.

The waste management company abandoned a graded system that increased the size and value of the company car based on an employee’s seniority. Now it has introduced a one-size-fits-all policy, with all 600+ eligible employees getting a Volkswagen 1.6-liltre BlueMotion Passat or a cash allowance.

“The grade of car has been narrowed down to one model and the cash allowance has also been reduced,” said a spokesman, who added that because Biffa’s current cars are on three-year lease contracts, it will not know how many employees will opt for cash, until their cars are due to come off lease.

The two companies’ moves may be the start of a trend being driven by boardroom resistance to company cars.

According to a new survey seen exclusively by Fleet News, a quarter of company directors say they are now prepared to put an end to all forms of employee benefits, including company cars.

The survey of 200 financial decision-makers found that 23% would not include any form of employee reward if they could start their staff benefits scheme afresh.

One in seven (14%) said they would opt to cut company cars, with a further 5% said they were willing to remove car allowances from their company benefits list.

However, companies have been warned against substituting company cars for a cash allowance.
ACFO chairman Julie Jenner said companies taking away company cars and offering cash are making a “short-sighted” move.

“In our experience it is more expensive to offer cash than a company car, unless you pay using the most tax efficient methods,” said Jenner. “And then you are faced with additional problems of lack of control over vehicles and maintenance, as well as additional administration around document checks. You should never replace company cars with cash.”

And boardrooms should also be aware that replacing company cars with a salary sacrifice scheme also presents its own issue, not least that a company’s fleet size – and therefore responsibilities and administrative burdens – could increase rapidly as traditional non-company car employees get access to a company vehicle.

“A thorough cost-benefit analysis of most firms’ current schemes would show that company cars rank highly against other benefits, as both a business asset and a staff reward,” said Claudia Rose, corporate sales director at Lloyds TSB Autolease, which carried out the survey.

“So while a regular review of fleet policy to take account of changes in legislation, taxation and operational capacity is a positive step, a complete withdrawal of the benefit would be a short-term cost saving measure that could ultimately prove detrimental.”

Fleet managers faced with pressure to cut the number of vehicles need to prepare a cost comparison with other options, such as grey fleet use and public transport.

In some cases, the use of pool cars and other options such as video-conferencing or using public transport may be cheaper than running a company vehicle.

However, the boardroom needs to be made aware of other cases for retaining company vehicles, such as staff retention, duty of care and cutting carbon emissions.